Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following statements is correct regarding consigned goods?

Ownership of consigned goods transfers to the consignee when the goods are shipped.

Consigned goods are recorded as inventory by the consignee upon receipt.

Consigned goods should be included in the inventory of the consignor until they are sold.

Consigned goods are excluded from the consignor's inventory once delivered to the consignee.

Previous problemNext problem

Verified step by step guidance

Understand the concept of consigned goods: Consigned goods are items sent by the consignor (owner of the goods) to the consignee (agent or seller) for the purpose of selling them. However, ownership of the goods remains with the consignor until the goods are sold.

Clarify the accounting treatment: Since ownership remains with the consignor, the consignor should include the consigned goods in their inventory until the goods are sold. The consignee does not record the consigned goods as inventory because they do not own them.

Analyze the incorrect statements: Ownership does not transfer to the consignee when the goods are shipped, and consigned goods are not recorded as inventory by the consignee upon receipt. Additionally, consigned goods are not excluded from the consignor's inventory upon delivery to the consignee.

Identify the correct statement: The correct statement is that consigned goods should be included in the inventory of the consignor until they are sold. This aligns with the principle that ownership determines inventory recognition.

Apply this understanding to similar scenarios: When dealing with consigned goods, always verify who retains ownership and ensure the inventory is recorded appropriately in the financial statements of the owner (consignor).